The ruble exchange rate strengthened due to interventions within the framework of the fiscal rule and the sale of foreign currency earnings

On the first full trading day of 2024, the Russian currency significantly strengthened its position. The dollar exchange rate during trading was approaching 89 rubles/$. This is facilitated by a drop in demand for currency from importers and individuals. In addition, its supply from exporters and the resumption of operations within the framework of the budget rule by the Bank of Russia have increased. By the end of January, the dollar exchange rate may drop to 85–87 rubles/$, analysts say.

On Tuesday, January 9, the American currency exchange rate based on trading results on the Moscow Exchange closed below 90 rubles/$ for the first time this year. At the same time, the dollar exchange rate was steadily declining almost from the very beginning of the main trading session and by 16:50 it even came close to the mark of 89 rubles/$. This result is more than 2 rubles. below the previous day’s closing value. At the end of the session, the rate stopped at 89.9 rubles/$. The European currency exchange rate decreased by 1.74 rubles, to 98.28 rubles/€, the minimum since the first ten days of December. The five-week minimum updated the Chinese yuan exchange rate, which ended the main trading at 12.49 rubles/CNY, having lost 22 kopecks during the day.

The strengthening of the Russian currency was accompanied by a recovery in investor activity. The volume of trading in dollars with delivery “tomorrow” amounted to almost 100 billion rubles, which is seven to ten times higher than the values ​​​​at auction during the New Year holidays and comparable to the December average. The volume of yuan trading also increased seven to ten times compared to previous days and exceeded 136 billion rubles. Director of the Treasury of Tsifra-Bank Dmitry Rozhkov draws attention to the fact that current trading volumes significantly exceeded the average values ​​in the first days of January of the previous year.

In January 2023, the average daily trading volume in the dollar and yuan (excluding trading on New Year’s holidays) was 75 billion and 62 billion rubles, respectively.

The main factor in the strengthening of the ruble, according to analysts, was the return of exporters after long holidays with sales of foreign currency, including within the framework of the decree on the mandatory sale of foreign currency earnings. “Exporters have accumulated foreign currency since the beginning of the year and are now converting it into rubles,” notes Vladimir Evstifeev, head of the analytical department of Zenit Bank.

In addition to this, low business activity at the beginning of the year has an impact, including low demand for foreign currency from importers and private investors. “In January, the demand for foreign currency for the purchase of imports, for foreign tourist trips, and for payments on external debt falls. In addition, budget expenditures may also decrease in January,” notes Sovcombank chief analyst Mikhail Vasiliev.

The new format of the fiscal rule, which began to operate from the beginning of 2024, also has a positive impact on the ruble exchange rate, but the effect is still limited.

Let us recall that the Bank of Russia stopped operations within the framework of the budget rule from August 10, 2023. From January 9, 2024, the Central Bank begins selling yuan in the equivalent of 0.9 billion rubles. per day as part of mirroring net expenses from the National Welfare Fund. “This is less than 1% of the trading volume in the yuan-ruble pair, and therefore the operations have little effect on the balance of power in the domestic foreign exchange market,” notes Vladimir Evstifeev.

However, from next week the impact of currency sales within the framework of the fiscal rule will increase, since sales of yuan by the Bank of Russia may increase several times. According to Mikhail Vasiliev’s estimates, up to 3–4 billion rubles. per day, which will be moderately positive for the ruble. A more significant impact will be exerted by the current account surplus of the balance of payments of the Russian Federation, the decree on the mandatory sale of foreign currency earnings for the largest exporters, high ruble interest rates, and sales of yuan from reserves as part of budget operations.

“Geopolitical and sanctions risks, soft budget policy, high inflation, and the possible abolition of the mandatory sale of foreign currency earnings after April 30 may be restraining factors for the ruble,” notes Mr. Vasiliev. According to analysts at Zenit Bank, by the end of January the dollar exchange rate may drop to 85–87 rubles/$. Sovcombank experts do not exclude the possibility that in the first quarter the dollar exchange rate may fall back to 85 rubles/$, the euro exchange rate to 93 rubles/€, and the Chinese currency exchange rate to 11.8 rubles/CNY.

Vitaly Gaidaev